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Only Four Days Left To Cash In On Hawkins' (NASDAQ:HWKN) Dividend

Hawkins, Inc. (NASDAQ:HWKN) is about to trade ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Hawkins' shares on or after the 16th of February, you won't be eligible to receive the dividend, when it is paid on the 3rd of March.

The company's next dividend payment will be US$0.15 per share. Last year, in total, the company distributed US$0.56 to shareholders. Calculating the last year's worth of payments shows that Hawkins has a trailing yield of 1.4% on the current share price of $40.65. If you buy this business for its dividend, you should have an idea of whether Hawkins's dividend is reliable and sustainable. So we need to investigate whether Hawkins can afford its dividend, and if the dividend could grow.

See our latest analysis for Hawkins

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Hawkins is paying out just 20% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year, it paid out dividends equivalent to 332% of what it generated in free cash flow, a disturbingly high percentage. Our definition of free cash flow excludes cash generated from asset sales, so since Hawkins is paying out such a high percentage of its cash flow, it might be worth seeing if it sold assets or had similar events that might have led to such a high dividend payment.

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While Hawkins's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Hawkins's ability to maintain its dividend.

Click here to see how much of its profit Hawkins paid out over the last 12 months.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Hawkins has grown its earnings rapidly, up 21% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Hawkins has lifted its dividend by approximately 5.1% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

Final Takeaway

From a dividend perspective, should investors buy or avoid Hawkins? We're glad to see the company has been improving its earnings per share while also paying out a low percentage of income. However, it's not great to see it paying out what we see as an uncomfortably high percentage of its cash flow. All things considered, we are not particularly enthused about Hawkins from a dividend perspective.

While it's tempting to invest in Hawkins for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 1 warning sign with Hawkins and understanding them should be part of your investment process.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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